Experts opinions needed: subject to or lease option? - Posted by DanM(OR)
Posted by DanM(OR) on May 27, 1999 at 12:12:59:
Here’s the Deal:
Last appraisal 1997: 67k
Zoning changed from Residential to C2 Commercial
Seller’s motivation is a balloon due next month of 12k
He has me and 2 other investors looking at it.
I pay off a second of 12k
Seller carries a 2nd:no interest and a balloon in 5 years for 8k
I take over the house subject to or assume the 1st of 47k
It is a VA assumable created in 97. I am not very familiar with assumable loans. Especially VAs.
Lease option with 12k payoff of second as option consideration. Secured by a performance mortgage.
3rd party escrow to pay on 1st. A 2nd for 8k due in 5 years no interest.
Payments are credited 100% and equal to sellers payment on the first.
The seller is open for both. Right now they both seem equally secure to me. I am not sure which may
be best for me.
I have T/Bs set up for a sandwich
Payments of $650/month (affordable) could probably find a better T/B
Fair market rent =$685
A note for option money: TBD
I will seek an 85% first for $67K assuming the house will appraise for at least 78.9K
I=~9% or less (am I dreaming?)
I then payoff the first of 47K
leaves= 20k - closing costs (~$3000)
left over $17K
Reimburse myself the 12K out of pocket I paid off on the 2nd.
5K Cash left at close
Equity = 77.9-67k = 10.9K
Cash Flow = 650 (Rent from T/B) - 539.10 / month (P&I) - 73.50(Insurance $882/12) - $35( estimated PMI) = $2.40
If interest is at 8% PMT=$491.62
Demand in the area for 3/1s is there. Especially w/ unheard-of seller financing. Hot market where I am right now. Possible conversion to a 2 office commercial. Have not yet looked into that much.
Thanks for your input!